India's housing finance struggles with regional disparities, warns NHB

As of 30 September, 2024, individual housing loans outstanding stood at Rs 33.53 lakh crore, reflecting a 14 per cent growth compared to the previous year

The regional disparity in housing finance is a major challenge for India, as the Southern, Western, and Northern states account for 35.02 per cent, 30.14 per cent, and 28.73 per cent, respectively, of cumulative disbursements during the first half (H1) of 2024-25 (FY25), whereas the share of Eastern states (including the Northeastern states) is 6.1 per cent.

 

The National Housing Bank (NHB), the regulatory body overseeing housing finance companies (HFCs) in India, said in its report, Trends and Progress of Housing in India, 2024, released on Tuesday, that the Northeastern states accounted for 0.68 per cent of total individual housing loan (IHL) disbursements during H1FY25.

 

Fourteen states — Maharashtra, Karnataka, Tamil Nadu, Telangana, Gujarat, Uttar Pradesh, Andhra Pradesh, Rajasthan, Kerala, Haryana, Delhi, West Bengal, Madhya Pradesh, and Punjab — contributed roughly 91 per cent of the individual housing finance market in terms of IHL outstanding.

 

However, the report noted that the future outlook for the housing sector remains promising, driven by rapid urbanisation, demographic shifts, digitalisation, sustainability, and infrastructure development.

 

“As housing demand continues to rise, the sector is poised for transformation, driven by advancements in financing models, regulatory improvements, and enhanced transparency, further accelerating growth,” the report said.

 

Another key challenge highlighted in the report is the limited number of institutions providing green building certifications and the lack of equivalence among rating certifications issued by different agencies.

 

“The higher cost of green materials for construction is a challenge,” the report added. 

 

As of September 30, 2024, IHLs outstanding stood at ₹33.53 trillion, reflecting 14 per cent growth compared to the previous year, with the MIG (Middle-Income Group) accounting for 44 per cent, EWS & LIG (Economically Weaker Section and Low-Income Group) for 39 per cent, and HIG (High-Income Group) for 17 per cent of total outstanding loans.

 

Housing loan disbursements during the half-year ended September 30, 2024 amounted to ₹4.1 trillion, while full-year disbursements for 2023-24 stood at ₹9.07 trillion.

 

The NHB Residex showed a year-on-year increase of 6.8 per cent for the quarter ending September 2024, up from 4.9 per cent the previous year. Key government initiatives, including Pradhan Mantri Awas Yojana-Gramin (PMAY-G), PMAY-Urban (PMAY-U), the impact assessment of PMAY-U, the Urban Infrastructure Development Fund, and the Affordable Rental Housing Complexes scheme, are highlighted in the report.

 

The total loan portfolio of HFCs increased by 14.36 per cent to ₹9.57 trillion as of 31 March 2024.

 

Of this, housing loans rose by 11.88 per cent, while non-housing loans increased by 21 per cent. The total net owned funds of HFCs grew by 16.37 per cent, from ₹1.36 trillion as of March 31, 2023, to ₹1.58 trillion as of March 31, 2024. The outstanding borrowings of HFCs (including public deposits) stood at ₹8.18 trillion as of March 31, 2024, reflecting annual growth of 12.88 per cent. The outstanding public deposits stood at ₹24,764 crore, registering year-on-year growth of 3.3 per cent. Gross non-performing assets (NPA) to total loans and advances stood at 2.32 per cent, while net NPA to total loans and advances stood at 1.18 per cent as of March 31, 2024.

 

The report also noted that HFCs have played a pivotal role in facilitating access to housing loans across diverse income segments in India. Housing loans as a percentage of gross domestic product increased from 3.2 per cent in 2001-02 to 6.6 per cent in 2011-12 and further to 11.29 per cent in 2023-24. The share of outstanding housing loans in total loans outstanding for scheduled commercial banks rose to 16.57 per cent in March 2024 from 9.41 per cent in March 2010.